Experts feel that the 54th GST Council meeting was critical for various sectors, particularly healthcare. The FM-led council on Monday reached a broad consensus on reducing taxes on health and life insurance premiums, and a final decision on this would be taken in the November meeting.
The GST Council meeting has laid the groundwork for substantial changes to the taxation system. While certain proposals are expected to gain broad support, others may encounter resistance from various stakeholders. As these reforms progress, ensuring they align with the government’s wider economic goals and avoiding any unintended negative impact on consumers or businesses is crucial.
The Council is exempted from GST grants or funds received for R&D by central or state-affiliated universities or those institutions that have Income Tax exemptions.
Briefing reporters after the 54th meeting of the GST Council, Sitharaman said the Council has decided to set up two new Groups of Ministers (GoM) — one on medical and health insurance and the other on compensation cess.
The GoM on compensation cess would suggest to the Council how to go about the GST compensation cess, which is levied on luxury, sin and demerit goods, once the loans taken to meet the shortfall in revenue of states during Covid-affected years are repaid.
The GST Council has decided to reduce the tax rate on cancer drugs — Trastuzumab Deruxtecan, Osimertinib and Durvalumab from 12% to 5%, certain categories of namkeen to 12%, from 18%.
However, the GST rate on car seats has been increased from 18% to 28%. This uniform rate of 28% will be applicable prospectively for car seats of motor cars to bring parity with seats of motorcycles which already attract a GST rate of 28%.
The Council also decided there will be 5% GST on the transport of passengers by helicopters on a seat share basis and 18% on the charter of a helicopter.
Also, flying training courses conducted by DGCA-approved Flying Training Organizations (FTOs) have been exempted from GST.
The GST Council also recommended the rollout of a pilot for B2C e-invoicing, following the successful implementation of e-invoicing in the B2B sector.
What Experts Said
Mahesh Jaising, Partner and Leader, Indirect Tax, Deloitte India, said, “The Council’s decision to establish a GoM to address the complexities surrounding group insurance and health coverage, especially under RWAs, showcases the government’s responsiveness to emerging challenges.”
Jaising added that the clear termination of the Compensation Cess by March 2026, with a surplus of Rs 40,000 crores, provides much-needed clarity to states while the formation of a GoM and Committee of Secretaries ensures a structured approach for revenue distribution.
GST Reduction On Drugs
Jaising highlighted that the reduction of GST rates on essential items like cancer drugs and everyday goods such as namkeens and savoury items reflects the Council’s continued focus on public welfare.
Clarification on export status for data hosting and advertising brings clarity for global investors and Indian businesses expanding in these sectors. The voluntary introduction of B2C invoicing underscores the Council’s intent to foster both relief, focus on environment-friendly measures and modernisation in GST compliance, particularly incentivising refunds for foreign tourists. These progressive reforms signal a pivotal shift in India’s indirect tax landscape, balancing revenue generation with economic facilitation.
While the overall rate rationalisation is still underway, announcements made to reduce/ exempt tax on specific services and goods is a welcome one, he added.
An interesting “go green” focused decision to roll out a pilot of B2C paperless invoices is not only an environment-friendly one, but one that will improve business & tax compliance efficiencies.
Jasmine Damkewala, Senior Partner at Circle of Counsels and Advocate-on-Record, Supreme Court of India, said that the Council has introduced a slew of proposals poised to reshape the taxation landscape.
The meeting’s agenda aimed to strike a balance between fostering economic growth and ensuring a more equitable tax structure.
Damkewala underlined that a notable highlight was the proposal to reduce taxes on life and health insurance, pending approval from the Fitness Committee. This move is expected to bring relief to policyholders and incentivise individuals to invest in health and life insurance.
Furthermore, the exemption from tax on University Grants for R&D is a welcome step that will bolster innovation and research in the country, Damkewala added.
UPI Transactions
Damkewala added that not all proposals have been met with enthusiasm.
“The plan to levy taxes on online transactions under Rs 2,000 has been criticised as a regressive step that could hinder the growth of digital payments in India. This move appears to contradict the government’s push for digitalisation and e-commerce,” Damkewala added.
Online Gaming
Online gaming, a sector under scrutiny, is once again in the spotlight. The GST Council has requested State Tax Officers to submit a status report on online gaming, which will inform future decisions. Notably, entry-level bets placed on online gaming platforms and casinos have been subject to 28% GST since October 1, 2023. The distinction between games of skill and games of chance will be crucial in determining tax implications for this industry.
Prepare For GST 2.0
Saurabh Agarwal, Tax Partner, EY India, said, “The government’s move towards rate rationalisation, the introduction of B2C invoicing and approval of invoice management systems clearly indicate its commitment to reforming the system. These steps aim to enhance transparency and plug loopholes. As the government continues its digitisation efforts, it is crucial for the industry to prepare for GST 2.0 and strengthen its systems accordingly.”
“The exemption from GST for research funding to universities and the reverse charge tax on import of services from related parties or Head Office by foreign airlines in India highlights the government’s dedication to resolving industrial disputes.”
Real Estate
Pratik Jain, Partner, PwC India, said, “The GST council has taken few far-reaching decisions which will provide relief to a broad spectrum of industries including real estate, IT (data hosting), foreign airlines, etc. There also seems to be more urgency around rate rationalisation with the council again scheduled to meet soon to discuss more.”
The extension of E-invoicing to the B2C segment and mechanisms like invoice management systems means that the ambit of technology is increasing substantially which the industry has to be prepared for. The next few months seem to be critical which will shape the future of our GST, Jain added.
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